Oil prices are easing slightly on Monday morning after last week’s surge as traders focus on the conflict between Israel and Hamas, which they fear could drag other countries into the conflict.

An escalated conflict could boost oil prices, an oil trader told Reuters.

”The impact that may involve oil-producing countries has been factored into the prices to some extent, but if an actual ground invasion were to occur and have an impact on oil supply, the prices could easily exceed USD 100 a barrel,” says Hiroyuki Kikukawa, director of NS Trading.

A barrel of the European reference oil, Brent, costs USD 90.55 on Monday morning, compared to USD 91.20 overnight on Monday, but USD 89.21 on Friday afternoon. At the same time, US West Texas Intermediate (WTI) oil trades at USD 87.43 compared to USD 87.88 on Monday night. On Friday at 5 p.m. CET, a barrel stood at USD 86.02.

The conflict in the Middle East has so far not had a major impact on supply in the global oil and gas market, but with the war posing the biggest geopolitical risk to the oil market since Russia’s invasion of Ukraine last year and concerns about a potential escalation involving Iran, traders are still cautious, Reuters reports.

Iran warned on Saturday that if Israel’s ”war crimes and genocide” are not stopped, the situation could spiral out of control with ”far-reaching consequences.”

If Iran is found to be directly involved in the Hamas attack, it will likely result in the US fully enforcing its sanctions on Iran’s oil exports, Vivek Dhar, an analyst at the Commonwealth Bank of Australia, says in a note according to Reuters.

”The US has turned a blind eye to its sanctions on Iran’s oil exports this year in order to improve diplomatic relations with Iran,” the analyst says and continues:

”The 0.5-1 million barrels per day increase in Iran’s oil exports this year - equivalent to 0.5-1% of global oil supply - risks being derailed if US sanctions are fully enforced.”

Fearing an escalation of the conflict, US Secretary of State Antony Blinken traveled to Israel on Monday to mediate.

(Translated using DeepL with additional editing by Kristoffer Grønbæk)